Indonesia's New Waste-to-Energy Framework: Presidential Regulation 109/2025 and the Private Sector Response

Reading Time: 20 minutes | October 2025

Executive Summary

Indonesia has taken a decisive step toward addressing its waste management crisis through Presidential Regulation 109/2025, signed by President Prabowo Subianto on October 10, 2025¹. This regulation establishes a new framework for converting urban waste into renewable energy through environmentally friendly technology. The policy represents a significant shift from the previous Presidential Regulation 35/2018, introducing higher electricity tariffs, longer contract periods, and eliminating tipping fees⁴. With Indonesia generating 56.63 million tons of waste annually and only managing 39.01% effectively, this regulation aims to transform waste from an environmental burden into a valuable energy resource.

The private sector has responded with remarkable enthusiasm to these regulatory changes. Danantara, the state investment management body, reports that 107 business entities have registered interest in PSEL (Waste-to-Energy Power Plant) projects⁶. International investors from Japan, China, the Netherlands, Germany, and Singapore have shown strong interest, demonstrating global confidence in Indonesia's waste-to-energy potential⁷. The program targets implementation in 33 cities nationwide, with ten priority locations identified for initial development.

However, the policy has sparked debate among environmental advocates and industry stakeholders. Critics argue that WTE technology may not effectively address Indonesia's waste crisis and could create new environmental challenges⁵. Despite these concerns, the government remains committed to this approach as part of its broader energy transition strategy and environmental management objectives. The success of this initiative will depend on effective implementation, technological choices, and balancing economic viability with environmental protection.

Background of Indonesia's Waste Management Challenge

Indonesia faces a mounting waste management crisis that demands immediate and comprehensive action. The nation produced 56.63 million tons of waste in 2023, with urban areas contributing the majority of this volume. Current waste management infrastructure handles only 39.01% of total waste through proper channels, leaving 60.99% to be disposed of through open dumping systems⁶. This situation has created severe environmental pollution, public health hazards, and contributed to what authorities now classify as a waste emergency, particularly in metropolitan areas.

The previous regulatory framework established under Presidential Regulation 35/2018 failed to deliver expected results in waste-to-energy development. Despite initial optimism, implementation faced numerous obstacles including unclear investment mechanisms, insufficient financial incentives, and complex bureaucratic processes. The regulation's inability to attract substantial private sector participation highlighted the need for a more comprehensive and attractive policy framework that could mobilize the necessary capital and expertise for large-scale WTE implementation.

Environmental degradation from inadequate waste management extends to immediate health concerns. Open dumping contributes to greenhouse gas emissions, contaminates water sources, and destroys valuable land resources. Major cities like Jakarta, Surabaya, and Bandung struggle with overflowing landfills, with facilities like Bantar Gebang in Bekasi operating far more than their intended capacity. These conditions have created an urgent need for alternative waste management solutions that can reduce landfill dependence while generating economic value from waste streams.

New Policy Framework Under Presidential Regulation 109/2025

Presidential Regulation 109/2025 introduces fundamental changes to Indonesia's waste-to-energy policy landscape. The most significant modification involves electricity tariff pricing, which has been set at a flat rate of 20 US cents per kilowatt-hour for all project capacities¹. This represents a substantial increase from the previous sliding scale of approximately 13 US cents per kWh, providing greater financial certainty for investors. The regulation also establishes a 30-year power purchase agreement period with PLN (the state electricity company), creating long-term revenue stability for project developers.

A critical shift in the economic model involves the elimination of tipping fees, which previously provided operators with up to IDR 500,000 per ton of processed waste. While this removes one revenue stream, the higher electricity tariff compensates for this loss and simplifies the overall financial structure¹. This change reflects a strategic decision to focus on energy generation as the primary economic driver rather than waste processing fees, aligning incentives more closely with power production efficiency.

The regulation assigns Danantara a central role in project implementation, granting it authority to select business entities for PSEL development and manage investments. Danantara can choose developers through competitive tenders or, under specific circumstances, through direct appointment⁷. Local governments retain responsibility for land provision, waste supply guarantees, and transportation infrastructure to PSEL facilities. This division of responsibilities aims to leverage national investment capabilities while maintaining local stakeholder involvement.

Private Sector Response and Investment Interest

The private sector's response to the new regulatory framework has exceeded initial expectations, with 107 business entities expressing formal interest in participating in WTE projects. This group comprises 53 domestic companies and 54 international entities, organized into approximately 70 consortiums⁶. Major international players from Japan, China, the Netherlands, Germany, and Singapore have positioned themselves to compete for project opportunities, bringing advanced technology and substantial financial resources to the Indonesian market.

Among domestic listed companies, four entities have emerged as frontrunners in WTE development. PT TBS Energi Utama (TOBA) strengthened its position through the IDR 4.77 trillion acquisition of Sembcorp Environment in March 2025, generating USD 59.6 million in revenue with EBITDA of USD 10 million by mid-2025⁷. PT Maharaksa Biru Energi (OASA) has partnered with China's Tianying for a IDR 2.65 trillion project in South Tangerang, designed to process 1,100 tons of waste daily and generate 19.6 MW of electricity.

PT Multi Hanna Kreasindo (MHKI) brings extensive experience in industrial waste management, positioning itself as a technically capable player in the sector. Meanwhile, PT Astrindo Nusantara Infrastruktur (BIPI) has announced plans to enter the WTE market with projects valued between USD 300-350 million, diversifying from its traditional oil and gas focus⁷. These companies represent the vanguard of domestic private sector engagement in Indonesia's waste-to-energy transformation.

The total investment requirement of IDR 91 trillion presents both opportunities and challenges for project financing. Danantara plans to support funding through Patriot Bonds and other financial instruments, while international development banks and green finance institutions have expressed interest in supporting environmentally sustainable projects. The combination of domestic and international capital sources, coupled with strong government backing, creates a favorable investment environment despite the long payback periods typical of infrastructure projects.

Implementation Timeline and Priority Locations

The government has established an ambitious timeline for nationwide WTE implementation, targeting completion across 33 cities by the end of 2027. Ten cities have been identified as priority locations for initial development based on their readiness in terms of waste volume, land availability, and infrastructure⁷. These priority cities include Jakarta, Tangerang, Bekasi, Bandung, Yogyakarta, Semarang, Surabaya, Medan, Bali, and Makassar, each generating minimum daily waste volumes of 1,000 tons required for viable WTE operations.

Danantara expects to launch the first projects by the end of 2025, with construction beginning shortly thereafter. The phased approach allows for learning and adjustment as initial projects come online, potentially refining technical specifications and operational procedures for subsequent developments. Each facility requires careful site selection considering factors including proximity to waste sources, grid connection capabilities, water availability for cooling systems, and distance from residential areas to minimize potential environmental impacts.

Local government readiness varies significantly across target cities. Some municipalities have already designated land and begun preliminary environmental assessments, while others face challenges in securing suitable sites. The regulation mandates local governments to ensure consistent waste supply and transportation infrastructure, requirements that may strain municipal budgets and administrative capabilities. Success will depend heavily on effective coordination between national investment bodies, local administrations, and private sector operators.

Technical Specifications and Environmental Standards

The regulation emphasizes environmentally friendly technology as a core requirement for WTE facilities, though specific technical standards remain to be fully detailed in implementing regulations. Projects must demonstrate proven, state-of-the-art technology with verified performance records in similar applications. Developers are required to show financial capability to meet investment obligations and documented experience in waste-to-energy or related renewable energy projects⁷.

Environmental concerns raised by advocacy groups highlight potential risks from WTE operations. Critics point to emissions of dioxins, furans, and heavy metals from incineration processes, substances linked to cancer, hormonal disruption, and developmental disorders⁵. Fly ash from incinerators requires special handling as hazardous waste, adding operational complexity and costs. Regular monitoring for dioxin emissions, recommended every six months, faces challenges due to limited testing facilities and high analytical costs in Indonesia.

The government maintains that modern WTE technologies can meet strict environmental standards while effectively reducing waste volumes. Advanced emission control systems, including scrubbers, filters, and continuous monitoring equipment, are expected requirements for all facilities. However, ensuring consistent compliance across multiple facilities operated by different entities will require robust regulatory oversight and enforcement mechanisms currently being developed by the Ministry of Environment.

Financial Implications for Stakeholders

The financial architecture of the new WTE framework creates distinct implications for various stakeholders. Project developers benefit from guaranteed electricity purchase agreements at attractive rates, providing predictable revenue streams essential for securing project financing. The 30-year contract duration allows for full cost recovery and reasonable returns on investment, though the elimination of tipping fees requires careful financial modeling to ensure project viability¹.

PLN, as the mandated electricity purchaser, faces obligations to absorb all power generated by WTE facilities at premium rates. This arrangement could impact PLN's overall generation costs and potentially affect electricity pricing structures. The state utility must balance these higher-cost renewable energy purchases with its broader mandate to provide affordable electricity to consumers, potentially requiring government subsidies or tariff adjustments to maintain financial sustainability.

Local governments bear significant financial responsibilities for land acquisition, infrastructure development, and waste collection systems. Without tipping fee revenues to offset these costs, municipalities must fund operations through general budgets or seek alternative financing mechanisms. Some cities may struggle to meet these obligations without additional central government support or innovative public-private partnership structures that share costs and risks more equitably among stakeholders.

Capital markets have responded positively to listed companies positioning themselves in the WTE sector, with several stocks experiencing increased investor interest. However, analysts caution that WTE projects require substantial upfront investment with extended payback periods, necessitating strong balance sheets and patient capital. Companies pursuing aggressive expansion in this sector may need to raise additional funding through equity offerings, bonds, or strategic partnerships with international technology providers.

Challenges and Criticisms from Environmental Groups

Environmental advocacy organizations have raised substantial concerns about the effectiveness and environmental impact of the WTE strategy. The Ecological and Wetland Conservation Study Institute (Ecoton) characterizes waste-to-energy as a "false solution" that fails to address root causes of Indonesia's waste crisis⁵. Critics argue that burning plastic waste essentially combusts fossil fuels, generating carbon emissions contradicting climate change mitigation goals while releasing toxic substances into the environment.

Existing WTE facilities in Indonesia have demonstrated mixed operational results. The Benowo facility in Surabaya has struggled to achieve its target of processing 1,000 tons daily, while the Bantar Gebang WTE plant faces technical difficulties and high operational costs⁵. These examples raise questions about the technical feasibility and economic sustainability of scaling WTE technology across multiple locations with varying waste compositions and operational conditions.

Alternative approaches proposed by environmental groups emphasize waste reduction at source, comprehensive recycling programs, and decentralized organic waste processing. Advocates suggest investing in public infrastructure for refillable water systems, banning single-use plastics under one liter, and mandating extended producer responsibility for packaging waste. These solutions, while potentially more sustainable, require significant behavioral change and may take longer to implement than centralized WTE facilities.

Strategic Opportunities for Private Sector Players

The WTE regulatory framework opens multiple strategic opportunities for private sector engagement across the value chain. Technology providers can introduce proven solutions from international markets, adapting them to Indonesian conditions while meeting environmental standards. Engineering, procurement, and construction (EPC) contractors stand to benefit from the construction phase of 33 facilities, representing a multi-year pipeline of infrastructure projects worth billions of dollars.

Financial institutions can develop specialized products tailored to WTE project requirements, including green bonds, sustainability-linked loans, and blended finance structures combining commercial and development funding. Insurance companies have opportunities to provide coverage for construction, operational, and environmental risks, developing expertise in this emerging sector. Local companies can position themselves as partners for international technology providers, offering market knowledge, regulatory navigation, and operational capabilities.

Waste collection and logistics companies may find new revenue streams in guaranteeing consistent waste supply to WTE facilities. The requirement for minimum 1,000 tons daily creates opportunities for integrated waste management services, including collection, sorting, and transportation. Companies that can ensure reliable waste flow while meeting quality specifications for combustion efficiency will become critical partners in the WTE ecosystem.

The regulatory emphasis on consortiums encourages strategic partnerships combining technical expertise, financial capacity, and local market presence. International players bringing advanced technology can partner with Indonesian companies providing local relationships and operational capabilities. These collaborations can accelerate knowledge transfer while ensuring projects meet both international standards and local requirements, creating sustainable competitive advantages for well-positioned consortiums.

Long-term Outlook and Policy Implications

The success of Indonesia's WTE initiative will significantly influence the country's environmental management and energy transition strategies. If implemented effectively, the program could reduce landfill dependence by processing up to 33,000 tons of waste daily across all planned facilities, substantially decreasing environmental pollution and land degradation. The electricity generated could contribute meaningfully to renewable energy targets while addressing waste management challenges simultaneously.

However, the program's long-term sustainability depends on several critical factors requiring continuous attention. Technology selection must balance efficiency with environmental protection, ensuring facilities meet emission standards throughout their operational life. Financial sustainability requires careful management of electricity pricing, operational costs, and potential changes in waste composition as recycling programs expand. Regulatory oversight must evolve to address operational challenges while maintaining environmental safeguards.

The WTE policy's interaction with broader waste management strategies remains a key consideration. While WTE facilities provide immediate solutions for waste disposal, they should not discourage efforts to reduce waste generation and increase recycling. Successful integration requires complementary policies promoting circular economy principles, extended producer responsibility, and sustainable consumption patterns. The government must balance WTE development with comprehensive waste management reforms addressing the entire waste hierarchy from reduction to disposal.

International climate commitments and Indonesia's net-zero emission target for 2060 add another dimension to WTE policy evaluation. While replacing open dumping with energy recovery reduces methane emissions, the carbon footprint of burning mixed waste, particularly plastics, requires careful accounting. Future policy adjustments may be necessary to align WTE operations with evolving climate standards and international agreements on plastic pollution and circular economy transitions.

Recommendations for Stakeholders

Private sector participants should conduct thorough due diligence on technology options, prioritizing proven solutions with strong environmental performance records. Investment decisions should account for potential regulatory changes, evolving environmental standards, and long-term waste composition shifts. Companies should develop local partnerships early, building relationships with municipalities and communities to ensure smooth project implementation and social acceptance.

Government agencies need to establish clear implementing regulations addressing technical standards, emission limits, and monitoring requirements. Coordination mechanisms between national and local authorities require strengthening to prevent bureaucratic delays. Support programs for local governments, particularly in land acquisition and infrastructure development, would accelerate project implementation. Regular policy reviews should assess environmental impacts and financial sustainability, adjusting frameworks as necessary.

Environmental stakeholders should engage constructively in monitoring and oversight processes, ensuring facilities meet stated environmental standards. Advocacy for complementary waste reduction and recycling programs remains essential, preventing over-reliance on end-of-pipe solutions. Community education about WTE technology, its benefits and risks, can promote informed public participation in decision-making processes affecting local environments.

Financial institutions should develop specialized assessment criteria for WTE projects, considering both financial returns and environmental impacts. Green finance frameworks can incentivize best practices while supporting Indonesia's sustainable development goals. Risk assessment models should account for regulatory changes, technological evolution, and potential stranded asset risks as waste management practices evolve toward more circular approaches.

Conclusion

Presidential Regulation 109/2025 represents a significant policy shift in Indonesia's approach to waste management, creating substantial opportunities for private sector participation while raising important environmental considerations. The strong investor response, with over 100 companies expressing interest, demonstrates market confidence in the regulatory framework and economic model. Success will require careful balance between rapid implementation to address waste crises and ensuring environmental protection through appropriate technology selection and operational standards.

The elimination of tipping fees coupled with attractive electricity tariffs creates a streamlined economic model focused on energy generation efficiency. This approach, while simplifying project economics, places greater emphasis on operational excellence and technology performance. Companies entering this sector must prepare for long-term commitments, substantial capital requirements, and evolving regulatory landscapes as Indonesia refines its waste management and energy policies.

Indonesia's WTE journey will serve as an important case study for other developing nations facing similar waste management challenges. The outcome of this ambitious program will influence regional approaches to waste-to-energy development and contribute to global discussions on sustainable waste management. As implementation proceeds, continuous monitoring, adaptive management, and stakeholder engagement will determine whether WTE becomes a cornerstone of Indonesia's environmental strategy or requires fundamental reconsideration.